This spring, rolls of high-speed fibre optic broadband cable will be snaked beneath Toronto’s waterfront, wiring the area with Internet capability usually made available only to the world’s most advanced research institutions.
It is part of an effort to entice a new breed of tech-focused companies to the city’s waterfront, and one of a variety of measures Canadian cities are taking, from tax breaks to venture capital experiments, to build economies based on innovation and ideas.
Around the world, cities are courting so-called knowledge industries – technology, media, telecom, clean tech and life sciences – which are seen as the new foundation of municipal economies, a long-term source of jobs, revenue and bragging rights.
But a new ranking of international cities by the Toronto Board of Trade shows that Canadian centres are lagging when it comes to the markers of innovation, including the number of patents, size of IPOs and levels of venture capital investment available.
“There are some brilliant people here with great ideas but they can’t seem to get the capital,” said Board of Trade President and CEO Carol Wilding. “Why is that?”
Questions about the Canadian economy are likely to factor predominantly into the federal election: A growing chorus is urging the government to move beyond discussions of deficit management and start outlining a plan to develop knowledge-based industries.
“When you look at other countries, all the governments are heavily involved in building this aspect of their economies. You look at Israel, Finland, Sweden – all of them have programs in place,” said John Ruffolo, head of Knowledge Investing for the Ontario Municipal Employees Retirement System. “We have to do it.”
Mr. Ruffolo believes Canadian cities have to invest aggressively in ideas, throwing their support and their money behind young companies, and young people, who are likely to come up with the next big thing.
Earlier this year, OMERS launched a new fund called Inkef Capital specifically to invest in Canadian startups. A partnership with the Netherlands-based pension fund APG, the fund will see almost $280-million invested across the country over the next five years.
Mr. Ruffolo says the fund, which he will oversee, is specifically designed to fill a $500,000-$2-million void in the Canadian venture capital scene, which he believes is keeping companies from blossoming and forcing the best and the brightest Canadians to seek support elsewhere.
“In my view, this is about the future of this country. It’s about keeping the companies here,” he said of the fund. “These companies must go where the money is available. It’s very simple.”
When it comes to fostering startups, venture capital is a major issue for Canadian cities, where most pension funds were scared out of the game following the tech bubble of 2000.
In its annual Scorecard on Prosperity report, released this week, the Toronto Board of Trade ranked international cities based on their average venture capital investments in new startups, and found Canadian centres far behind. The top Canadian city, Montreal, boasted only a fifth of the funds available in Seattle, which ranked third, and just an eighth of the venture capital in top-ranked San Francisco.
To its credit, since 2003, the Quebec government has poured millions into pools of venture capital along with a union investment fund and the province’s main public sector pension plan. By 2009, their seed investment of $600-million helped about a dozen venture funds raise another $600-million from the private sector for investment in Quebec.
Jacques Bernier, one of Quebec’s leading venture capitalists and now a senior partner in Teralys Capital, says tax credits, well-funded educational programs and an established pool of skilled labour should lead to the increasingly rapid growth of new startups.
“The first 10 years put in place the skill set to allow it to grow,” Mr. Bernier said. “Now I think we’re going to enter the phase of harvesting, where we’ll see major growth.”
